Consulting hours to implement MS Teams

[Lasa1]

Hello,

We have recorded the consulting hours to implement Teams (Microsoft Communication platform) as an intangible asset. The cost is above our threshold (cape vs non capex) and Teams will be used much more than one year.
Is it right to book it as an intangible asset ? I would say so, but i prefer to check

Thanks

[Marek Muc]

See this section and follow the links there:

https://ifrscommunity.com/knowledge-bas ... rvice-saas

[JRSB]

It must be so small as to be not worth it.... I guess what you might consider as 'materiality' is much higher than your 'capitalisation threshold' which I guess is pretty low

[Marek Muc]

There are companies where opex vs capex distinction is very important for budgeting and KPI reporting and company-wide materiality levels are irrelevant for project managers etc.

[JRSB]

Glad we're back online! Good luck to project managers who are conscious of IFRS accounting issues too then, they'll get an advantage I guess.

[Marek Muc]

Yep, there was some downtime on Friday morning...

Some PMs have no choice but to have a decent understanding of what gets capitalised and what goes to opex - otherwise they wouldn't be able to manage their budgets. Opex = EBITDA, capex = well... capex Makes a huge difference in performance analysis and reporting (doesn't apply to all companies of course)

[Marek Muc]

@Lasa1 - what did you conclude?

[Leo]

Thanks Marek for sharing the link to the decision tree of PWC.

When I ran it, I conclude that it's probable that it's a capex :

1. Third party or entity customises the Saas
2. Mostly meets the definition of an intangible assets IAS38.57, because teams once implemented, will bring economic benefits to organisations within the company, thus, improve the productivity etc...

[Marek Muc]

2. Mostly meets the definition of an intangible assets IAS38.57, because teams once implemented, will bring economic benefits to organisations within the company, thus, improve the productivity etc...

but you cannot capitalise Teams

[Leo]

Yes, I was talking about the costs related to implementing TEAMs

[Marek Muc]

As I see it, you weren't analysing the implementation costs, you just wrote about Teams. And the issue here is to look at the implementation costs knowing that Teams is not your asset.

[Leo]

Hi Marek, thanks for your comments !

You see, I understand that I have to analyse the costs of implementing TEAMs not TEAMs it self. But in practice, how you do it since in the standard IAS38 57 the intangible asset mentioned is the finished project as a whole ? How can I analyse the implementation costs without mentioning TEAMs.

IAS 38.57 :

"57 An intangible asset arising from development (or from the development phase of an internal project) shall be recognised if, and only if, an entity can demonstrate all of the following:
(a)the technical feasibility of completing the intangible asset so that it will be available for use or sale.
(b)its intention to complete the intangible asset and use or sell it.
(c)its ability to use or sell the intangible asset.
(d)how the intangible asset will generate probable future economic benefits. [Refer: paragraph 17] Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.
(e)the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.
(f)its ability to measure reliably the expenditure attributable to the intangible asset during its development."

Thanks Marek

[Marek Muc]

Yes, this is precisely the challenge here and the reason most SaaS implementation expenditures are treated as opex

[Leo]

Understood, thanks Marek ! Have you seen from your experience, what type of implementation costs of SaaS could be capitalizable ? Thanks Marek for sharing

[Marek Muc]

I've seen one such examle where the entity developed some code that could be used with more than one SaaS solution, so this was a kind of software in its own right

[Leo]

very clear, thank you very much !

[Marek Muc]

Hi Lasa1, can you please share your actual approach for this scenario?